The first stage in establishing a company is selecting the form of business, which depends most of all on your company’s area of activity and related risks and needs, amount of capital and objectives.
The forms of business differ from each other primarily with regard to the following characteristics:
- principles, extent and share of shareholder liability;
- the company’s management bodies and decision-making processes, right of representation;
- the amount of required share capital and means of contribution;
- the company’s audit requirements;
- the simplicity of organizing everyday activity (such as accounting).
The most common forms of business in Estonia are sole proprietor (FIE), private limited company (OÜ) and public limited company (AS).
Comparison of the primary features of each form of business
| Form of business | Min. required start-up capital (euros) | Minimum required number of founders | Financial liability | Management |
|---|---|---|---|---|
| Sole proprietor | none | 1 | Unlimited liability | No management bodies |
| Private limited company | 2500; none if the share capital is not bigger than 25 000 | at least 1 | Partners are not personally liable for the private limited company’s obligations | The obligatory management body of the private limited company is the management board; a supervisory board is mandatory only if specified in the articles of association. |
| Public limited company | 25 000 | at least 1 | Shareholders are not personally liable for the public limited company’s obligations | The supreme management body of the public limited company is the general meeting of shareholders; a public limited company must have a management board and supervisory board |
| General partnership | none; amount of the contribution is stipulated in the partnership agreement | at least 2 | Unlimited liability for the partnership’s obligations is shared equally by the partners | No obligatory management bodies; |
| Limited partnership | none; amount of the contribution is stipulated in the partnership agreement | at least 2 | At least one general partner has unlimited liability for the partnership’s obligations; at least one limited partner has limited liability to the extent of their contribution | No obligatory management bodies; |
| Commercial association | 2500 | at least 2 | Partners are not personally liable for the commercial association’s obligations unless agreed otherwise | The general meeting is the association’s supreme body, decision are made by voting, where every member of the association has one vote. The management board is the association’s management body. |
Types of companies
According to the amendments of the Accounting Act, which became effective on 1 January 2016, companies are divided into different categories based on the figures of the balance-sheet date of the accounts and the level of public interest.
The categories of companies are:
micro undertaking – a private limited company which indicators meet on the balance sheet date of an accounting year all the following conditions: total assets up to 175,000 euros, liabilities not exceeding the owners’ equity, one shareholder who is also the member of the management board and which sales revenue during an accounting year is up to 50,000 euros;
small undertaking – a company registered in Estonia which is not a micro undertaking and only one of which indicators may exceed on the balance sheet date of an accounting year the following conditions: total assets 4,000,000 euros, sales revenue 8,000,000 euros and average number of employees during an accounting year 50 persons;
medium-sized undertaking – a company registered in Estonia which is neither a micro undertaking nor small undertaking and only one of which indicators may exceed on the balance sheet date of an accounting year the following conditions: total assets 20,000,000 euros, sales revenue 40,000,000 euros and average number of employees during an accounting year 250 persons;
large undertaking – a company registered in Estonia at least two of which indicators exceed on the balance sheet date of an accounting year the following conditions: total assets 20,000,000 euros, sales revenue 40,000,000 euros and average number of employees during an accounting year 250 persons.
Source: Eesti.ee